Home sales were up 6.2 percent in the Milwaukee-area in October, rebounding from a decline in September.
But realtors are concerned that the Republicans’ proposed federal tax reform plan includes changes to the mortgage interest deduction and a cap on the deduction for property taxes. They fear those changes would result in lower residential property values, according to the latest Greater Milwaukee Association of Realtors monthly report.
More than 75 percent of the homes sold in the metro Milwaukee last month were under $300,000, due to an increase in listings in three of the four metropolitan counties, bucking the year-long trend of low inventory rates, particularly with lower-priced homes.
“The increase in listings was easily gobbled up due to strong demand that is continuing into the fall months,” said Mike Ruzicka, president of the GMAR. “The strong economy is producing interest in home buying, particularly among first-time buyers and Millennials, who brokers estimate comprise about 40 percent of the market this year.”
October was the seventh time sales were up in 2017, and the 27th positive month since January of 2015, when the real estate market really emerged from the recession, Ruzicka said.
October was the fourth month of the year with an increase in listings in the four-county area.
Milwaukee County lead with 111 new listings and Washington and Ozaukee counties added another 36. Waukesha County had 31 fewer listings, for a net gain of 116 new homes for sale.
Comparing 2017 to 2016, listings are about even, with 17,813 units in 2017 versus 17,807 units listed through October of 2016.
The Republican’s proposed federal tax reform law, which includes a change to the mortgage interest deduction, has realtors concerned for several reasons.
Under current law, homeowners can deduct interest payments made on their first $1 million worth of home loans. The proposed bill would allow existing mortgages to keep the current rules, but for new mortgages, home buyers would be able to deduct interest payments made only on their first $500,000 worth of loans.
The bill also only allows people to deduct their local property taxes from their taxable income, up to the first $10,000.
Increasing the standard deduction would make the mortgage interest deduction less appealing and eliminating the deduction of state income and property taxes will lead to a net increase in federal taxes for property owners in the state, Ruzicka said.
“Finally, due to the double whammy of tax increases and decreased (mortgage interest deduction) use, property values are expected to decline 10 percent (after suffering a huge decline just a few years ago); not to mention the impact on the social benefits of home ownership,” Ruzicka said.
The Greater Milwaukee Association of Realtors estimates the changes in the tax bill would reduce property values by the following amounts:
• 1st District (Speaker of the House Paul Ryan) = $18,920
• 4th District (Congresswoman Gwen Moore D-Wisconsin) = $13,580
• 5th District (Congressman Jim Sensenbrenner R-Wisconsin) = $21,630
• 6th District (Congressman Glenn Grothman R-Wisconsin) = $15,690
“Property owners should call their Congressman/woman and express their feelings about the provisions of the federal tax bill that harm property and home ownership,” Ruzicka said.
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